Equity market investors have witnessed intensified volatility over the past few weeks due to factors such as the Russia-Ukraine war, surging inflation, and major central banks (including RBI) raising policy rates. The S&P BSE Sensex is down sharply from its all-time high and is currently trading at around 53,000 level.

In the current market environment, if you are looking for capital appreciation from equities but do not have a high-risk appetite, you can consider investing in Aggressive Hybrid Funds. These schemes are likely to be less volatile than pure equity funds due to the presence of debt component. Thus, Aggressive Hybrid Funds can provide some stability to your portfolio.

Canara Robeco Equity Hybrid Fund is an Aggressive Hybrid Fund that has registered commendable performance in various market phases and has rewarded its long-term investors with superior risk-adjusted returns.

Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Equity Hybrid Fund 5 years ago

Graph 1

Past performance is not an indicator of future returns
Data as on May 17, 2022
(Source: ACE MF)  

Launched way back in February 1993, Canara Robeco Equity Hybrid Fund is one of the oldest schemes in the Aggressive Hybrid Fund category. The fund has managed to deliver consistently on the risk-adjusted returns front and has stood strong even in depressed market conditions. In the market crash of 2020, Canara Robeco Equity Hybrid Fund managed to limit the downside better when compared to its benchmark as well as category peers, while in the recent bull phase, its performance has been superior when compared to the benchmark but has trailed the category average. Over the last 5 years, Canara Robeco Equity Hybrid Fund has appreciated at a CAGR of 12.1% as against about 11% CAGR generated by the benchmark CRISIL Hybrid 35+65 – Aggressive Index. An investment of Rs 10,000 in the fund 5 years back would now be worth Rs 17,728, as against a valuation of Rs 16,843 for the simultaneous investment in the benchmark. The superior stock-picking ability and risk management process have driven the performance of the fund, helping it find a spot among top category performers.

Table: Canara Robeco Equity Hybrid Fund’s performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant Absolute Fund 342 15.84 50.46 28.26 18.92 15.90 19.81 0.32
BOI AXA Mid & Small Cap Equity & Debt Fund 363 17.01 41.32 21.66 13.32 20.42 0.24
ICICI Pru Equity & Debt Fund 19,331 22.39 39.84 19.29 14.15 14.54 19.53 0.22
Kotak Equity Hybrid Fund 2,554 11.95 35.37 17.76 11.85 12.59 18.72 0.22
Baroda BNP Paribas Aggressive Hybrid Fund 764 7.29 25.88 16.49 12.87 16.20 0.22
Edelweiss Aggressive Hybrid Fund 205 14.32 30.76 15.74 11.85 10.92 16.76 0.20
Canara Rob Equity Hybrid Fund 7,662 8.13 24.73 15.08 12.13 12.26 15.22 0.20
Mirae Asset Hybrid Equity Fund 6,649 8.87 27.53 14.29 12.38 16.99 0.18
SBI Equity Hybrid Fund 50,933 11.02 26.75 14.18 12.40 11.72 16.07 0.18
UTI Hybrid Equity Fund 4,244 11.21 32.52 13.97 9.31 10.31 18.31 0.16
CRISIL Hybrid 35+65 – Aggressive Index 7.47 24.56 13.36 10.98 11.01 14.89 0.16

Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on May 17, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Canara Robeco Equity Hybrid Fund has registered a noteworthy performance in the last few years and has generated a decent lead over the benchmark CRISIL Hybrid 35+65 – Aggressive Index and the category average over longer time frames. While Canara Robeco Equity Hybrid Fund has trailed the category average in the last 1-year and 2-year period, its performance was nearly in line with the benchmark. On the longer 3-year, 5-year, and 7-year periods, the fund maintained a noticeable lead over its benchmark and also outpaced many of its prominent peers in the category.

On risk-return parameters, Canara Robeco Equity Hybrid Fund has encountered much lower volatility when compared to its peers and is reasonable when compared to the benchmark. The fund’s superior performance over the last few years has helped it evolve in terms of risk-adjusted returns. Its Sharpe (0.20) ranks among the best in the Aggressive Hybrid Fund category.

Investment strategy of Canara Robeco Equity Hybrid Fund

Canara Robeco Equity Hybrid Fund is an Aggressive Hybrid Fund that is mandated to invest in a blend of equity and debt instruments to provide optimum returns to the investors. The fund invests a major portion of its assets in equities and the balance in debt securities. Depending on the prevailing market scenario, the fund managers adjust the allocation of equity and debt in the scheme while maintaining a minimum allocation of 65% in equities.

Being an Aggressive Hybrid Fund, Canara Robeco Equity Hybrid Fund aims to benefit from the growth opportunities in the equity markets as well as generate steady income from debt markets. The fund follows a GARP (Growth At A Reasonable Price) style of investing that combines the tenets of both growth and value investing by finding companies that show consistent earnings growth but are available at reasonable valuations. The equity portion of the fund is predominantly invested in large-caps and some portion in quality mid-cap stocks with an aim to enhance overall returns through capital appreciation.

On the other hand, the debt allocation endeavours to limit the downside risk and is actively managed following a blend of the ‘Accrual’ and ‘Duration’ strategies. Canara Robeco Equity Hybrid Fund invests in high-quality corporate bonds and money market instruments in order to minimise the credit risk. However, its exposure to instruments issued by private issuers may be subject to credit risk.

Graph 2: Top portfolio holdings in Canara Robeco Equity Hybrid Fund

Holding in (%) as of April 30, 2022
(Source: ACE MF)  

Canara Robeco Equity Hybrid Fund usually holds a well-diversified portfolio of stocks spread across market caps but with a large-cap bias. As of April 30, 2022, the fund held 51 stocks in the portfolio. The top 10 equity holdings in the portfolio accounted for nearly 33.9% of the total assets. Large-cap names like ICICI Bank, Reliance Industries, Infosys, HDFC Bank, SBI, etc., appear in the list of its top portfolio holdings. Many of these stocks have been part of the fund’s top holding for over two years.

In the last one year, Canara Robeco Equity Hybrid Fund has benefited the most from its exposure to ICICI Bank, Reliance Industries, Infosys, SBI, Polycab India, Bajaj Finance, Minda Industries, L&T, and Titan Company, among others.

Canara Robeco Equity Hybrid Fund has a higher allocation to stocks in the Banking and Finance sector that collectively form 22.2% of its assets. It also holds substantial exposure in Infotech, Engineering, Petroleum, Consumption, and Pharma along with diversification to Cement, Chemicals, and Auto, among others. The top 10 sectors together occupied about 58.5% of the fund’s portfolio. The fund holds a well-balanced exposure to cyclical and defensive sectors.

Canara Robeco Equity Hybrid Fund’s debt allocation of around 19.2% is invested across 45 debt instruments. It currently has allocation of 10.2% to G-Secs along with around 6.5% in high-rated Corporate Debt instruments and 2.5% in CDs. The fund holds high-quality assets in the debt portion of its portfolio focusing on top-rated public and private issuers. The average maturity of the debt portfolio is typically in the range of around 1-2 years.

Suitability

Canara Robeco Equity Hybrid Fund has a superior track record of creating wealth over longer time periods. The long-term investment focus and prudent risk management strategies adopted by the fund have helped it deliver superior risk-adjusted returns.

The fund has a history of over 29 years to its credit and has been dominating the returns table of Aggressive Hybrid funds for quite some time. It has experienced fund managers at the helm whose convictions have played out well in the past and may continue to do so in the future as well.

Canara Robeco Equity Hybrid Fund is suitable for investors looking for a cautiously managed Aggressive Hybrid Fund with an investment horizon of at least 3-5 years.

This article first appeared on PersonalFN here


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